The New Hampshire Insurance Department recently issued a bulletin on permissible forms of insurance producer compensation.
“We had received inquiries from producers and wanted to provide helpful guidance for them,” a New Hampshire Insurance Department spokesperson said of the bulletin.
The bulletin (Docket No.: INS-15-003-AB), issued on Feb. 18, states under the state’s law, insurers are permitted to pay — and licensed producers are permitted to receive — compensation for the sale, solicitation, or negotiation of insurance “by way of a commission, service fee, brokerage, or other valuable consideration.”
The bulletin says the law’s use of the disjunctive “or” in the list of permissible forms of compensation means that if a producer receives a commission for the sale, solicitation, or negotiation of an insurance contract, the producer would not be allowed to also charge a service fee for the same activity.
The bulletin also says insurers and licensed producers may enter into producer agreements that provide for services that are incidental to the sale, negotiation, or solicitation of an insurance contract. But a producer is not permitted to receive compensation from the insurance company for such incidental services while also seeking compensation from the insured for the service.
“Essentially, we are telling producers that they cannot double bill: get paid twice for doing something once. If they are receiving compensation from an insurance company, they cannot then seek compensation from an insured client for the same service,” the department spokesperson said.
The department also says in the bulletin that a licensed producer may seek compensation from an insured for services that are not directly associated with the sale, solicitation, or negotiation of an insurance contract and for which the producer is not receiving compensation from an insurance company. Producers may enter into separate written contracts with insureds for such services, which could include a separate fee. However, to the extent these additional services are provided free of charge, producers must comply with the state’s anti-rebating statute.
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